Clutha District Council says it is on target to temporarily fix a town's water supply before it is expected to run out.
Lawrence relies on Phoenix Dam for water, which has been lowered for flood protection.
The council is concerned there may only be four to six weeks capacity left and the bottom quarter may be unusable.
The dam's owners also want to close it due to safety concerns, telling the council about its plans in February, but a new bore will not be ready until later this year.
The council has applied for consent to bypass dam to shore up the water supply.
Provisions under the Resource Management Act mean work has already started.
The council said it was progressing well and was on target to be finished by the end of the month.
"Advice received by Council is that there will be sufficient flow supplied from the bypass, which will also be accepting water from the Bungtown Creek outer race when operational, to maintain the supply for Lawrence until the new bore is commissioned," the council said.
"The message is that Lawrence water supply is sufficient, with Level 3 restrictions in place, to meet the town's needs.
"The work being undertaken on the bypass provides a fail-safe interim measure to provide sufficient and continuous flow to below the dam embankment to the water supply intake."